Commentary: Income Inequality

Years ago, I put together a series of panel discussions on the American dream. The people involved differed a good deal as to what the dream really meant, but they agreed on some things.

Everybody thought part of it meant that America was a place where if you worked hard, you could get ahead. And that America was a place where a decent life was available for all.

Tragically, that’s not as true as it used to be. Today, the Michigan League for Public Policy, formerly known as the League for Human Services, unveiled a new national study on incomes.

The study, conducted by the Washington-based Center on Budget and Policy Priorities, confirmed something that has been increasingly obvious. The rich are getting richer and the poor more desperate, a trend that has been accelerating over the last ten years or so. The problem isn’t that there are rich and poor.

That’s always been the case. But between the Great Depression and the late 1970s, the gains created by the booming American economy were spread more evenly.

Nobody confused an auto worker with the Rockefellers, but both were able to live decent lives, with hope for better things in the future. But then that began to change, slowly at first, then faster.

That’s been documented before, but this new study is different in that it looks at income inequality at the state level. The good news, if you can call it that, is that Michigan is not one of the states with the greatest income inequalities. New Mexico is the worst, followed closely by states like Arizona and California.

But things are getting worse. The last decade has been really bad for Michigan, and the poorest twenty percent of households have seen their incomes fall by more than ten percent.

The richest five percent haven’t lost anything, thank you. Matter of fact, their incomes are up more than eighty percent since the nineteen eighties began. The poor folks have steadily lost.

Today, the richest five percent of Michigan families have incomes twelve times as high as the poorest households. More sobering, their incomes are four times those of folks in the middle. Actually, the real picture is probably worse, since this study left out income from capital gains. Families in homeless shelters seldom have any of that. What the study does reveal is that inequality is a national problem, individual states can do a lot to mitigate the effects. Most of these things are obvious: Raise the minimum wage and tie it to inflation. Strengthen unemployment benefits and make tax systems less regressive.

Michigan’s is one of the worst, since we pay the same rate regardless of incomes. Sorry, but I should pay a higher rate than my students and somewhat less than Dick DeVos.

Sadly, I fear that all the policy prescriptions in this report would be hotly opposed by the Republicans who control the state legislature. What they don’t realize, however, is something President Kennedy said half a century ago: “If a free society can’t help the many who are poor, it cannot save the few who are rich.” Over time, a few societies have gotten a painful lesson in how true that it. This study may provider a road map to avoid that particular cliff.